Filling the gap between bank loans and the crowd

Most small-business owners will have to apply for a bank loan at some point of their entrepreneurial careers. But getting a loan involves a lot more than doing the paperwork and saying a prayer. You need to take a long and hard look into how you will pay back your loan on time, considering your current financial standing, all of which comes after deciding how much you really need.

You may find yourself jumping through hoops and over hurdles to get that money, which more often than not, leads to a rejection from the bank. Being rejected not only hurts your morale, but can actually deem you as more of a high risk when you apply for future loans at other banks, and that’s not a pleasant position to be in.

How crowdinvesting can help

The good news is that there is money to spare in the system and there are plenty more avenues from which you can receive funding, and that’s the crowd. By crowd, we in no way only mean your exhaustive friends list (sorry mom!). In your business dealings, you come across and touch the lives of many people: customers, suppliers, vendors, lawyers, your previous co-workers and silent bystanders who have always been interested in your business. Remember that the crowd tends to invest in the people behind the business rather than the business itself. Think of the crowd as the ubiquitous and omnipresent Frozen Banana Stand of Arrested Development fame, and if you build it, they will come.

Make sure you tap into this existing network of supporters who will ultimately turn into brand ambassadors once they have a vested interested (i.e. equity) in your company if you play your cards right. Just remember: there’s always money in the banana stand!

How do I get started?

Before you start a crowdinvesting proposal, make sure you have a good handle on how much cash you actually need and what milestone you’re looking to achieve. Will you be expanding to a new market, scaling operations or hiring your dream team? Good for you! Now you need to determine the costs by creating a monthly cash-flow projection. You get paid in 60 day cycles, but do you have to pay your vendors in 15 days? If so, you might need extra money to tide you over if anything goes awry.  Tandem is a locally based company which helps entrepreneurs make sound financial projections which can help develop your business plan.

Will the money help my business grow?

If you’re crowdinvesting $10,000 for payroll or other routine operating expenses, you’re not generating more revenue and could find yourself in the same spot three to six months from now. Corwdinvestment is not meant to plug a hole in your business. Instead, it should be used to put dollars into the parts of the business that will generate more revenue over time and help reduce future borrowing needs. The road to successfully funding your business isn’t easy, but it is empowering and very rewarding when achieved via crowdinvesting.

To reiterate

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